Should I use credit cards to meet my daily life expenses?

Life without that shiny piece of plastic called your credit card is almost impossible to imagine today! In the modern day we use these cards to purchase everything from groceries to gadgets. But is that necessarily the right thing to do? The debate continues till date. While the younger generation (from 18-35 years of age) are heavily in favour of credit usage, the older generation (35 and above) are still wary of credit usage and for them, putting daily expenses on credit cards is a big no-no! But they quite the devil as they are made out to be?

Let’s take a closer look at the pros and cons of using credit cards to meet daily life expenses:

Pros

Helps build a good credit record

The popular misconception about cards is that they can lead to financial ruin of an individual in the form of a debt trap and lead to abad CIBIL score. That is only a partial truth, if you are not judicious with your usage of credit. On the contrary, prudent use of your card can actually help you build a good credit record, if you are young and using credit for the very first time. However in order to build a good credit record and consequently have a high CIBIL score, you should follow certain ground rules such as:

Make full repayment of your outstanding balance in each billing cycle

Only spend the amount you think you can repay within a billing cycle.

Keep your credit utilisation (the amount of credit you use as against the total amount you are eligible for) under 30%.

Rebuilding credit

If you are grappling with a low CIBIL score and your credit health leaves much to be desired, you can use a secured credit card to rectify your score. These cards are usually issued by the top commercial banks in India against a fixed deposit you maintain in them. The credit limit on such cards is thus 80-85% of the value of the fixed deposit. When you opt for such a card and follow the rules as mentioned above, you can slowly but surely rebuild your credit and remove the tarnish of a bad CIBIL score. This, in turn, will improve your score in due course of time and help you salvage your credit reputation.

Many benefits of reward points

The daily usage of cards also leads to a host of rewards, in the form of cash backs, discounts on retail outlets, diners, movie tickets, e-commerce and airmiles and waiver on fuel surcharge. If you select the right card according to lifestyle and spending pattern, you can maximise your reward points to enhance your savings.

Better bookkeeping

When you put your daily expenses on your credit card, you are in fact creating an accounting trail for yourself. When you check your accounts and tally it with your credit card statement each month, you will be able to find out exactly where and when your money was allocated to during the billing cycle. On the basis of this data, you can make alteration to your budget and spending pattern.

Cons

The danger of overspending

The greatest danger of putting every expense on a credit card is that you may not realise the expenses you are taking on and thus end up spending much more than you can afford on your card. Consider an example. When we eat, especially when it is something we like or enjoy, it takes about twenty minutes for our brains to realise that our stomachs are full. This delay of 20 minutes delay causes us to overeat. The biggest difference of using cash or debit cards as against credit cards is a similar delay in effect. You may not realise the damage of overspending till the statement arrives at the end of the month.

Thus, as is clearly visible, the pros outweigh the cons of using credit cards for everything.